Analysis of Financial Statements Question Answer

Solution : C

The following statements are correct :

Common-size balance sheet shows relative value of the various items.

In the common size income statement, each product is represented as a percentage of the Revenue from Operations.

Solution : D

The following statements are true :
External analysis depends entirely on issued financial statements.
Interpretation and analysis both are different.
Financial analysis covers interpretation.

Solution : D

Both the Statement of Profit and Loss and Statement of Financial Position i.e. Balance Sheet  are used for financial analysis.

Solution : B

When financial statement figures for two or more years are placed side-by-side to facilitate comparison , these are called comparative analysis.

Solution : A

Cash balance is  (1,00,000 / 4,25,000) * 100 = 23.53% of total assets

Solution : A

Comparative balance sheet statement shows the increase and decrease in various assets, liabilities and capital in two or more balance sheets of the same business enterprise on different dates

Solution : A

Comparative statements are also called year-to-year change statements.

Solution : C

Selling Expenses = (60,000 / 2,50,000) * 100 = 24% of Total Revenue

Solution : B

Common size statement express all items of financial statement as a percentage of some common base such as total assets for balance sheet

Solution : C

Revenue From Operations is used as base for preparation of common size statements of profit and loss.